Correlation Between Iron Mountain and Walmart

Can any of the company-specific risk be diversified away by investing in both Iron Mountain and Walmart at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Iron Mountain and Walmart into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Iron Mountain Incorporated and Walmart, you can compare the effects of market volatilities on Iron Mountain and Walmart and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Iron Mountain with a short position of Walmart. Check out your portfolio center. Please also check ongoing floating volatility patterns of Iron Mountain and Walmart.

Diversification Opportunities for Iron Mountain and Walmart

0.39

Correlation Coefficient

Iron Mountain  Walmart

Weak diversification

The 3 months correlation between Iron and Walmart is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Iron Mountain Incorporated and Walmart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walmart and Iron Mountain is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Iron Mountain Incorporated are associated (or correlated) with Walmart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walmart has no effect on the direction of Iron Mountain i.e., Iron Mountain and Walmart go up and down completely randomly.

Pair Corralation between Iron Mountain and Walmart

Assuming the 90 days trading horizon Iron Mountain Incorporated is expected to under-perform the Walmart. In addition to that, Iron Mountain is 1.44 times more volatile than Walmart. It trades about -0.01 of its total potential returns per unit of risk. Walmart is currently generating about 0.28 per unit of volatility. If you would invest  2,726  in Walmart on September 26, 2024 and sell it today you would earn a total of  780.00  from holding Walmart or generate 28.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Iron Mountain Incorporated  vs.  Walmart

Iron Mountain

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Iron Mountain Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Iron Mountain is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Walmart

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, Walmart sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Iron Mountain and Walmart

The main advantage of trading using opposite Iron Mountain and Walmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Iron Mountain position performs unexpectedly, Walmart can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Walmart will offset losses from the drop in Walmart's long position.

The idea behind Iron Mountain Incorporated and Walmart pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.